OnDeck vs. Funding Circle: Which Lender Is Better for Your Small Business?

With online lending, getting capital for your small business has become increasingly accessible. In fact, with so many lenders in the space, it can be overwhelming to choose between two lenders. In our comparison below, we look at two major players, OnDeck and Funding Circle, to help you decide which lender is better for your small business needs.

OnDeck vs. Funding Circle Summary

OnDeck and Funding Circle are two of the larger players in the online business lending space. Generally speaking, we find OnDeck to be better for businesses just starting out compared to Funding Circle because of OnDeck's lower requirements. In the table below, we compare and contrast each lender based on eligibility criteria, loan terms and funding times to help you pick the best lender for your needs.

When to Use OnDeck Over Funding Circle

OnDeck may be a better option than Funding Circle if:

You need a line of credit

You have a credit score under 620

You want a short-term loan

You need money quickly

Funding Circle only offers business term loans, so if you want a line of credit, OnDeck is the only choice between the two lenders. OnDeck offers lines of credit from $6,000 to $100,000 with terms of six months. APRs on these range from 13.99% to 39.99%, and your business will need to be one year old with $100,000 in annual revenue to qualify. You’ll also need a credit score of at least 500 to be considered. Lines of credit at OnDeck require weekly repayment over the course of six months.

For borrowers with poor to fair credit, OnDeck remains the better choice between the two lenders. Similar to the line of credit, you'll need a personal credit score of 500 or above to qualify for a term loan. Funding Circle, on the other hand, requires a minimum credit score of 620 to be considered for its loans. One downside to the lower credit requirements at OnDeck are the higher APRs. In 2015, the average APR at OnDeck was 45% for business loans and 33.8% for lines of credit.

Most of the loan products offered by OnDeck are fairly short-term. The loans come with terms of three months to three years, while the lines of credit have fixed six-month terms. OnDeck also requires daily or weekly repayment, which some business owners might prefer to large, lump-sum monthly payments. There are also no prepayment penalties at OnDeck. Business owners looking to pay off their debt quickly might find OnDeck to be an attractive option.

One of the biggest advantages of using OnDeck is speed. Once you are approved for a loan, OnDeck can fund your loan offer within 24 to 48 hours. For comparison, Funding Circle may take up to 10 days to fund your loan offer -- this is because Funding Circle is a peer-to-peer lender, so your loan is dependent on individual investors funding your offer.

When to Use Funding Circle Over OnDeck

Funding Circle is a better option than OnDeck if:

You want a longer term loan

You want a monthly repayment schedule

You can afford to wait for funds to qualify for a lower APR

You have good credit score to qualify for a low APR

When you take out a loan from Funding Circle, you’ll be able to choose terms between one and five years with monthly repayment. For business owners who want an online loan closer to a traditional bank loan, Funding Circle offers this with its longer maturities and monthly payment schedule. In comparison, OnDeck requires either daily or weekly payment -- which some business owners might find disruptive to their cash flow -- on loan terms and only offers maturities between three months to three years. Funding Circle is a better choice for business owners seeking a more traditional experience.

Typical APRs at OnDeck are much higher than what you’d typically get with an SBA loan or from a bank, averaging between 33% and 45%. Funding Circle, in contrast, offers APRs between 8% and 33%, which is closer to what you might receive on a bank loan. However, you’ll need a fair to excellent credit score to qualify at Funding Circle. You’ll also need patience, as it may take up to 10 days to fund your loan offer. Creditworthy borrowers who can afford to wait for funds are likelier to score a better deal at Funding Circle than OnDeck.

How to Choose Between OnDeck and Funding Circle

Before you even apply, make sure you meet the eligibility criteria for each lender. OnDeck requires businesses to be at least one year old with $100,000 in annual revenue. Borrowers need a personal credit score of 500 to qualify. Funding Circle also has credit and credit requirements: your business must be at least two years old, and you must have a credit score of 620.

For those that are eligible, consider the specifics of the loan you’ll be requesting. This includes how much money you intend to borrow, how you plan to use it and when you need it. As mentioned previously, OnDeck is a better option if you need the flexibility of a line of credit or if you need money quickly. If you can afford to wait for funds, you may want to consider Funding Circle as the lender offers lower rates. Both lenders offer loans up to $500,000 so either can be a great choice for a larger loan. In general, short-term loans and lines of credit are better for cash flow or everyday working capital needs, whereas long-term loans are better for large investments in your business.

After you apply and receive a loan offer, do your due diligence regarding the loan contract. Make sure you understand the total amount to be disbursed to your bank account, when and how you will repay, what each payment will look like, what fees apply, what your total cost of capital is and what your interest rate is. You should also read the loan contract to identify any other stipulations or agreements, such as a personal guarantee or collateral requirement. Look for any other stipulations the lender might have added; i.e., on a commercial real estate loan, a lender may require you to pay and complete a building inspection to receive funds. If you don’t understand a part of the contract or take issue with it, speak or negotiate with your lender.

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